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The Citizen
6 days ago
- Business
- The Citizen
Weekly economic wrap: local politics and US tariffs coming next week
While inflation remained low in June, the picture can change from 1 August if the US tariff on South Africa remains at 30%. It was another busy week on the local political front, with a minister fired, while on the international front countries are waiting to see if US president Donald Trump will TACO (Trump Always Chickens Out) or stick to his guns and implement the tariffs he recently proposed. Lisette IJssel de Schepper, chief economist at the Bureau for Economic Research (BER) says while it was a big week on the local political front, there was some constructive momentum. President Cyril Ramaphosa dismissed higher education and training minister Nobuhle Nkabane who is facing accusations that she misled parliament. After Nkabane's dismissal, the DA agreed to support the departmental budget on higher education, essentially clearing the way for the Appropriation Bill to be passed. 'While this will not be the last test for the government of national unity (GNU), she says it is a welcome sign that Budget 3.0 can now be finalised, allowing attention to shift toward the October medium term budget policy statement (MTBPS),' De Schepper said. ALSO READ: 'Open our eyes and ears' – Ramaphosa on how to tackle US tariff hike on SA cars US tariffs: will Trump TACO? She said that ahead of next week's 1 August deadline, Trump announced another 'massive' trade deal. Japan and the US agreed on a 15% reciprocal tariff, rather than the 25% that Trump initially threatened. 'Reports suggest that the European Union and the US are nearing a deal, also for 15%, but this has not been confirmed. Unlike other nations or regions, the EU already announced that it has a retaliatory package ready to implement, if necessary, which puts the global economy at additional risk should negotiations fail. 'Trump has said that 15% will probably serve as a floor for reciprocal tariffs, which means the UK was 'lucky' to have been able to settle at 10% early on. In addition to Japan, a deal was reached with the Philippines, with tariffs at 19%, in line with Indonesia and just below Vietnam's 20%.' ALSO READ: JSE All Share Index hit 100k points Oil and gold lower as risk appetite increases Bianca Botes, Citadel Global director, commenting on commodities, says Brent crude breached $69/barrel as markets cheered progress on a US-EU trade agreement, anticipating that reduced tensions would spur global growth and oil demand. 'Supply-side forces further bolstered prices, including constrained Russian exports and tighter diesel markets due to new EU import restrictions and talks of sanctions on Russian oil. These factors offset demand concerns and underpinned the week's rally,' she said Botes saidgold hovered near $3 360 per ounce, consolidating earlier gains after a midweek pullback as risk appetite improved. 'Easing of global trade frictions and equity records prompted some investors to rotate out of safe haven assets, but gold still managed a 0.6% rise for the week, benefiting from lingering uncertainty around US Fed policy and geopolitics.' ALSO READ: Economists lower GDP growth forecast due to global and domestic risks Rand firmed against the dollar this week Turning to the rand, Botes says it firmed against the dollar, moving in tandem with rising JSE equities and elevated commodity prices. 'Steadiness in domestic bond yields, resilient mining sector profits and improved global risk appetite provided support for the currency, despite local growth and fiscal headwinds.' Busisiwe Nkonki and Isaac Matshego, economists at the Nedbank Group Economic Unit, said the rand gained strength on Wednesday, trading at R17.55/$ against the dollar, as inflation increased slightly, suggesting the Reserve Bank (Sarb) may proceed with further interest rate cuts. 'Renewed optimism on the GNU also supported the local unit. All parties in the GNU supported the 2025 Appropriation Bill, dampening earlier fears of a deadlock after the DA threatened to oppose the bill if the president did not act against a truant cabinet minister. 'However, the local unit surrendered some of the gains this morning to trade around R17.77/$ this afternoon.' ALSO READ: Inflation still low enough for repo rate cut, but only in September – economists Inflation edged up to 3% in June as expected Inflation edged up to 3% in June from 2.8% in May, driven by food and non-alcoholic beverages that increased by 5.1% and housing and utilities that increased by 4.4%. The increase in food inflation was mainly driven by an acceleration in meat prices (6.6%) amid supply chain issues due to avian flu and foot and mouth disease, Tshepiso Maroga, economist at the BER, says. Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole and Koketso Mano, economists at FNB, say they see headline inflation rising to 3.6% in July, as utility and food costs ratchet up and fuel deflation moderates. For the year, they forecast average headline inflation of 3.5%. Nkonki and Matshego also said the increase was in line with their expectations. 'The food price increases were caused by temporary restrictions on poultry imports from Brazil due to avian flu, some tightening in local red meat supplies due to new outbreaks of foot-and-mouth disease and the lingering impact of earlier floods on vegetable and fruit supplies.'
The Citizen
21-07-2025
- Business
- The Citizen
Can SMEs survive Trump tariffs? Here is what small businesses can expect from July
There is still hope that the government trade negotiation teams will be able to strike a deal before the 30% tariffs come into effect. It is about to be a bumpy road for small and medium enterprises (SMEs) in South Africa from July due to the 30% United States (US) import tariffs, hikes in electricity and petrol prices and the uncertainty surrounding the interest rate announcement coming on 30 July 2025. Miguel da Silva, group executive for Business Banking at TymeBank, says it is essential for SMEs to prepare for the impact of a 30% US import tariff, which is set to take effect on 1 August 2025. The impact of tariffs on SMEs Da Silva adds that the tariff hike is bad news for businesses that currently export to the US, especially those involved in the agricultural, automotive, and mining sectors. 'The tariff increases will also have repercussions for the broader economy, with commentators saying the move could lead to thousands of job losses across the affected sectors.' He says there is still hope that the government trade negotiation teams will be able to strike a deal before the 30% tariffs come into effect. In the meantime, President Cyril Ramaphosa has called on South African companies to accelerate their search for alternative markets in order to promote better resilience in both global supply chains and the South African economy. ALSO READ: SMEs need to brace for reduced orders due to a 30% US tariff New export markets for SMEs Da Silva says exporters have been seeking out new markets, taking advantage of trade agreements such as the African Continental Free Trade Area (AfCFTA) to strengthen intra-African commerce and lessen reliance on the US. 'The Brics+ bloc also presents an opportunity for local exporters to tap into major markets like China, Southeast Asia, Saudi Arabia, and the UAE. 'Already, China has announced a decision to eliminate all tariffs on imports from the 53 African countries, including South Africa, which is welcome news for SMEs looking for new markets.' Electricity and petrol price increases He highlighted that electricity and petrol price increases add to SMEs' woes, but on the bright side, inflation appears to be under control. 'The US tariff blow comes at a time when South African SMEs are already facing margin squeeze because of additional cost pressures from energy price hikes and fuel price increases, all of which threaten not only their short-term profitability but also their long-term sustainability and competitiveness.' According to the Bureau of Economic Research's (BER) latest survey, inflation expectations have fallen to their lowest in four years. 'Respondents expect inflation to be below 4% this year, echoing the view of Reserve Bank governor Lesetja Kganyago.' ALSO READ: Mid-year financial check for SMEs: Tips to prepare for the next six months Unemployment remains a concern He has noted that there is modest growth and mixed expectations around interest rates, while unemployment remains a concern. 'GDP data for Q2 2025typically arrives on 25 July. The recent modest growth of 0.4% quarter-on-quarter suggests continued economic challenges, making this release vital for demand forecasting and timing market expansion. 'Expectations about the outcome of the 31 July South African Reserve Bank's (SARB) Monetary Policy Committee (MPC) meeting, scheduled for 31 July 2025, are mixed.' Interest rates to hold Da Silva highlighted that most analysts believe interest rates will remain unchanged, while a few still see a possibility of a 25-basis-point cut. 'We hope the SARB decides to put growth above inflation control this time. In principle, lower interest rates mean more disposable income for consumers, which should ultimately result in increased spending and demand for goods and services from SMEs.' He emphasised that there is an increased collaboration between the private sector, government, and financial institutions to foster funding and investment opportunities for SMEs. 'This may include government initiatives, revamped credit guarantee schemes, and partnerships with fintech companies.' NOW READ: Here is how SMEs can take advantage of the G20 and B20 summits
Irish Independent
07-07-2025
- Business
- Irish Independent
AIB targeting SMEs with green loans of up to €100k
The new loan is being launched with a variable interest rate of 4.95pc for amounts between €2,000 to a maximum of €100,000 repayable over between one and seven years. The loan product is available to support businesses investing in a wide array of green and transition measures including renewable energy systems, building upgrades, forestry, green buildings (commercial and residential), zero-emission vehicles, circular economy and waste management. The new Business Sustainability Loan is available to all businesses including farmers, clubs, trusts and charities Applications can be made in branch, through advisers or on the phone, with quick decision-making and e-signing, the bank said. Green lending has become a key focus for AIB, from mortgages to major corporate clients, as well as the new SME product. Greening your business can help reduce costs AIB's managing director, retail banking, Geraldine Casey, said the new loan offering aims to support owners investing in the future of their business. 'Greening your business can help reduce costs, drive efficiencies and competitiveness, attract new customers and staff, and, vitally, protect businesses against future climate risks,' Ms Casey added. To qualify for the new loans, customers will be required to provide evidence of eligibility such as an invoice or valid BER certificate, to confirm that the purpose of the loan request aligns to the criteria of the loan. Agri businesses must show evidence of membership in one of a number of existing environmental schemes including Bord Bia Quality Assurance. So-called green lending remains a niche, if growing, share of banks' businesses. Among consumers, the value of green personal loans jumped by 56.8pc since 2023 to €30.2m in the last quarter of 2024, figures published in May by the Banking and Payments Federation of Ireland (BPFI) showed. The number of green loans increased by 48.7pc over the same time to a total of 1,326 in a three-month period. The average green loan was 'relatively high' at €22,795 in quarter four, which was more than twice the average of €10,425 for all loans.
The Citizen
04-07-2025
- Business
- The Citizen
Weekly economic wrap: politics dominate, lower inflation expectations
Between fears of how the economy will react to the DA-ANC tensions and the US' new bill and tariffs, inflation expectations decreased. Politics dominated the economic news this week, with local and global politics taking centre stage, while a South African survey on inflation expectations had good news for consumers from all the groups surveyed. Lisette IJssel de Schepper, chief economist at the Bureau for Economic Research (BER) points out that while tensions persisted in South Africa between the DA and ANC, international headlines were dominated by the passage of the 'Big Beautiful Bill' in the US and the fast-approaching US tariff deadline. Bianca Botes, director at Citadel Global, says gold gained, while oil slipped as fiscal and trade risks weigh on commodities. 'Gold advanced to around $3,330/ounce, maintaining a solid position due to lingering uncertainty, even in an improved-sentiment environment. 'The US Tax-and-Spending bill's anticipated $3.3 trillion-plus impact on the deficit, along with the risk of new tariffs, bolstered gold's appeal.' ALSO READ: Policy Uncertainty Index drops slightly while global and local uncertainty remain Oil markets and the rand trending lower She says oil markets, on the other hand, are trending lower, with Brent Crude falling to approximately $68.50/barrel. 'Market sentiment was shaped by speculation that the expanded Organization of the Petroleum Exporting Countries (OPEC+) may increase output at its upcoming meeting, adding to downward pressure. 'Nonetheless, medium-term forecasts remain positive, with some analysts expecting higher average prices in 2025 due to persistent supply constraints outside OPEC and steady demand growth. However, geopolitical factors remain in play, particularly US sanctions on Iran, which added a layer of uncertainty to the global supply picture.' The rand kept surprising economists, strengthening to around R17.50/$, its strongest level since late 2024, supported by a declining dollar, elevated gold prices and improving local political sentiment. 'While the rally has been encouraging, the rand's outlook remains sensitive to both domestic developments and broader commodity market dynamics.' Busisiwe Nkonki and Isaac Matshego, economists at the Nedbank Group Economic Unit, say the rand was buoyed by higher global risk appetite this week, firming to its strongest level since the second week of November, trading at R17.60 on Friday afternoon. ALSO READ: Inflation expectations almost at four-year low Inflation expectations looking good De Schepper says according to the BER's inflation expectations survey, expectations declined across the board in the second quarter, with the inflation expectations of all three social groups, (businesspeople, trade union representatives and analysts) decreasing, with the downward adjustment extending across the forecast horizon. On average, the respondents expect that headline consumer inflation will be 3.9% during 2025, then rise gradually to 4.3% in 2026 and 4.5% in 2027. The inflation expectations of households for the next 12 months decreased to 5.4%, from 5.7% before. This is the lowest rate since the fourth quarter of 2021. 'The moderation in expectations not only firms up the likelihood of a 25 basis points rate cut in July but should also support the South African Reserve Bank's (Sarb) desire to shift to a lower inflation target. Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole and Koketso Mano, economists at FNB, say the household experience of inflation is determined by spending patterns. 'While lower-income households will be more affected by food, higher-income households will be more sensitive to transport and insurance costs. That said, higher household expectations reflect the nuances beyond headline inflation readings. 'This is a dynamic that will also affect how quickly the Sarb is able to efficiently and sustainably achieve a lower inflation objective. High administered inflation may need to be compensated for by further non-admin core disinflation, which suggests less monetary policy easing. That said, the efficacy gains from a credible central bank and effective communication cannot be overlooked.' ALSO READ: Absa PMI increases but in contractionary territory for eighth consecutive month PMIs a mixed bag again The Absa Purchasing Managers' Index (PMI) increased by 5.4 points in June to reach 48.5, the second-highest reading this year and the largest monthly increase since September 2024, although it remains below the neutral 50 points. The S&P Global PMI, on the other hand, decreased by 0.7 points to 50.1 in June. While it remains in expansionary terrain, the underlying data showed output and new business declines, De Schepper points out. Furthermore, she says, the forward-looking confidence index slipped to its lowest level in four years. 'The divergence between this index and the Absa PMI could reflect survey timing: the Absa survey was conducted after the end of the 12-day war between Isreal and Iran and amid a lull in global tariff news, while the S&P survey was fielded during the final two weeks of the month and likely captured more of the lingering uncertainty.' Matikinca-Ngwenya, Mkhwanazi, Sithole and Mano say the good news in the Absa PMI is that new sales orders surged by 7.8 points, driven mainly by domestic demand. 'Despite stronger demand, production declined slightly, and supplier delivery times lengthened, likely due to increased activity rather than supply issues.' ALSO READ: New vehicle sales finish first half of 2025 on a noteworthy high New car sales keep increasing Naamsa reported that new vehicle sales increased by 18.7%, slightly down from 22% in May, with sales increasing for a fourth consecutive quarter. Exports also bounced back with 7.9% growth from a 14.6% contraction in May. Nkonki and Matshego say new vehicle sales surprised on the upside in June, much higher than their forecast of 14.3%. They noted that imported models outperformed those produced by local OEM's, reflecting heightened price sensitivity among consumers given still-tight household budgets. 'The broader recovery in vehicle sales is supported by subdued inflation, better credit conditions and the 100-bps drop in interest rates. However, the outlook is tempered by soft business confidence and lingering uncertainty around trade policy. Still, the industry should benefit from a more supportive macroeconomic backdrop heading into the second half of the year.'
IOL News
02-07-2025
- Business
- IOL News
South Africa's economic outlook worsens, but wage growth expectations rise
A new survey shows expectations of a wage increase Salaries are now expected to increase by 4.9% this year and 5.1% in 2026, up from 4.5% and 4.8% respectively in a first quarter survey, according to the BER. South Africans are now more pessimistic about economic growth, with financial analysts, business executives, trade union representatives, and households seeing gross domestic product materially lower than three months ago. However, respondents see higher wages even though they anticipate a slow down in inflation. Salaries are now expected to increase by 4.9% this year and 5.1% in 2026, up from 4.5% and 4.8% respectively in the previous survey, according to the BER. This is according to the Bureau of Economic Research's (BER) second quarter survey, which polled these three groups on behalf of the South African Reserve Bank. Respondents now expect the economy to grow by a mere 0.9% this year, compared to 1.2% previously. For 2026, those polled anticipate gross domestic product (GDP) growth of 1.2%, down from the 1.4% forecast in the first quarter. South Africa's GDP gained 0.1% in the first quarter of the year, which beat economists' expectation of a decline.
